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Monday, 01 April 19
FORCE MAJEURE SUCCESS NOT A SEA CHANGE - BALTIC EXCHANGE
 KNOWLEDGE TO ELEVATE
It is difficult to successfully argue that contractual performance has been prevented or delayed by force majeure. This is in part because English courts or arbitration tribunals will interpret these clauses strictly and narrowly against the party seeking to rely on them.
Recent decisions, including Triple Point Technology v PTT (2017) and Seadrill Ghana v Tullow Ghana (2018), are evidence of this approach. However, Sucden Middle-East, represented by Nick Fisher of HFW, has recently relied successfully on such a clause in the Commercial Court, on appeal from arbitration.
The case, Sucden Middle-East v Yagci Denizcilik Ve Ticaret Limited Sirketi, “The Mv Muammer Yagci”, involved a shipment of sugar to Algeria on the Sugar Charter Party 1999 form. The facts found by the arbitral tribunal were that when the cargo arrived in Algeria, the cargo-receivers submitted false import documents to local customs authorities. The local customs responded by seizing the cargo, using powers under customs laws and regulations.
A delay to discharging the cargo of four and a half months ensued. Sucden, as charterers, claimed this delay fell within the exceptions to laytime running under clause 28. Owners disagreed. At first instance, the arbitral tribunal agreed with owners.
Charterers appealed to the Commercial Court. Permission to bring the appeal was given on the basis that the question of law was one of general public importance, as it related to a standard form contract in wide commercial usage.
The judgement
The question before the Commercial Court was: “Where a cargo is seized by the local customs authorities at the discharge port causing a delay to discharge, is the time so lost caused by ‘government interferences’ within the meaning of clause 28 of the Sugar Charter Party 1999 form?” Clause 28 reads:
“Strikes and Force Majeure
In the event that whilst at or off the loading place or discharging place the loading and/or discharging of the vessel is prevented or delayed by any of the following occurrences: strikes, riots, civil commotions, lockouts of men, accidents and/or breakdowns on railways, stoppages on railway and/or river and/or canal by ice or frost, mechanical breakdowns at mechanical loading plants, government interferences, vessel being inoperative or rendered inoperative due to terms and conditions of employment of the Officers and Crew, time so lost shall not count as laytime on demurrage or detention…”
In deciding whether a force majeure event had occurred, the Court focused on the construction of “government interferences”. It was fairly straightforward to establish that a government entity acting in a sovereign capacity was involved, but owners argued that the government being involved was not enough and that there had to be “interferences”. In reaching its decision that there had been no interference, the tribunal had considered it a key point that seizure was an “ordinary” action. The Court rejected this conclusion. It held that the seizure of the cargo was not routine and did fall within the meaning of “interferences”. Seizure is a significant exercise of executive power and therefore could not be regarded as “ordinary”. Suspected or predictable consequences are not the same as ordinary actions (such as the inspection of the cargo by a government surveyor): “In the usual course of things, cargo is not seized and property rights are not invaded in that way.” The very fact that false documents were involved showed that the circumstances were not routine.
The Court emphasised that it was of “real importance” that its conclusion on the language was not difficult to apply, nor did it in any way offend commercial common sense.
The owners’ causation argument was also dismissed, as it was held that the seizure caused the delay, even if the submission of false documents caused the seizure.
Further detail
In allowing the appeal, the Court still maintained the strict and narrow approach to force majeure, stressing that “the answer given to the question is only a narrow ‘yes’. It is ‘yes’ where the circumstances are as in the present case. The answer does not address all of the circumstances that may come within or fall outside clause 28. The answer is concerned only with the seizure of a cargo and with that seizure by a customs authority that is a State revenue authority acting in a sovereign capacity”.
This judgment gives some welcome publicly-available guidance on the interpretation of a force majeure clause in a standard form widely used in sugar trading. While the charterers were successfully able to rely on the force majeure clause in this case, it does not signal a change in the strict and narrow approach typically adopted by the English courts.
Source: Baltic Exchange
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- Baramulti Group, Indonesia
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- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Tata Chemicals Ltd - India
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- Orica Australia Pty. Ltd.
- Price Waterhouse Coopers - Russia
- Malabar Cements Ltd - India
- GVK Power & Infra Limited - India
- SMG Consultants - Indonesia
- IHS Mccloskey Coal Group - USA
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- Parry Sugars Refinery, India
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- Carbofer General Trading SA - India
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- TeaM Sual Corporation - Philippines
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- Therma Luzon, Inc, Philippines
- Vizag Seaport Private Limited - India
- Antam Resourcindo - Indonesia
- The Treasury - Australian Government
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Samtan Co., Ltd - South Korea
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- Jindal Steel & Power Ltd - India
- Jaiprakash Power Ventures ltd
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Globalindo Alam Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Posco Energy - South Korea
- Interocean Group of Companies - India
- The University of Queensland
- Banpu Public Company Limited - Thailand
- PTC India Limited - India
- Heidelberg Cement - Germany
- Essar Steel Hazira Ltd - India
- Mintek Dendrill Indonesia
- Energy Link Ltd, New Zealand
- Ministry of Finance - Indonesia
- Sree Jayajothi Cements Limited - India
- Lanco Infratech Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Dalmia Cement Bharat India
- Borneo Indobara - Indonesia
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Formosa Plastics Group - Taiwan
- Kumho Petrochemical, South Korea
- GAC Shipping (India) Pvt Ltd
- Kideco Jaya Agung - Indonesia
- Straits Asia Resources Limited - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Makmur.PT - Indonesia
- London Commodity Brokers - England
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Miang Besar Coal Terminal - Indonesia
- Independent Power Producers Association of India
- Mercuria Energy - Indonesia
- Thiess Contractors Indonesia
- Indika Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- OPG Power Generation Pvt Ltd - India
- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Bhoruka Overseas - Indonesia
- Bayan Resources Tbk. - Indonesia
- Vedanta Resources Plc - India
- Australian Commodity Traders Exchange
- Commonwealth Bank - Australia
- Attock Cement Pakistan Limited
- Wilmar Investment Holdings
- Directorate Of Revenue Intelligence - India
- Standard Chartered Bank - UAE
- Toyota Tsusho Corporation, Japan
- Planning Commission, India
- AsiaOL BioFuels Corp., Philippines
- Indian Oil Corporation Limited
- Riau Bara Harum - Indonesia
- ICICI Bank Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Ministry of Mines - Canada
- Australian Coal Association
- Africa Commodities Group - South Africa
- Global Coal Blending Company Limited - Australia
- Orica Mining Services - Indonesia
- Indogreen Group - Indonesia
- Meralco Power Generation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Sakthi Sugars Limited - India
- Sarangani Energy Corporation, Philippines
- Siam City Cement PLC, Thailand
- Ambuja Cements Ltd - India
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- Edison Trading Spa - Italy
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Anglo American - United Kingdom
- VISA Power Limited - India
- Intertek Mineral Services - Indonesia
- Deloitte Consulting - India
- Latin American Coal - Colombia
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- Binh Thuan Hamico - Vietnam
- Barasentosa Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- PNOC Exploration Corporation - Philippines
- White Energy Company Limited
- Bangladesh Power Developement Board
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- Indonesian Coal Mining Association
- Maheswari Brothers Coal Limited - India
- Electricity Authority, New Zealand
- Oldendorff Carriers - Singapore
- Coastal Gujarat Power Limited - India
- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- Vijayanagar Sugar Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Parliament of New Zealand
- Star Paper Mills Limited - India
- IEA Clean Coal Centre - UK
- Global Green Power PLC Corporation, Philippines
- Tamil Nadu electricity Board
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Uttam Galva Steels Limited - India
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Eastern Energy - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining Corp, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- San Jose City I Power Corp, Philippines
- Grasim Industreis Ltd - India
- Siam City Cement - Thailand
- CNBM International Corporation - China
- Xindia Steels Limited - India
- South Luzon Thermal Energy Corporation
- European Bulk Services B.V. - Netherlands
- Karaikal Port Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Romanian Commodities Exchange
- Rio Tinto Coal - Australia
- Renaissance Capital - South Africa
- Ministry of Transport, Egypt
- Singapore Mercantile Exchange
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- Directorate General of MIneral and Coal - Indonesia
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- MS Steel International - UAE
- Cigading International Bulk Terminal - Indonesia
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